Trimming Illinois' Medicaid spending is one of the stickiest problems lawmakers will consider this year, but Gov. Pat Quinn's proposal to cut $2 billion is a blunt approach that would hurt the Illinois economy and cost 19,000 jobs, according to the head of Illinois' influential hospital lobby.

In an interview with The Associated Press, Illinois Hospital Association chief Maryjane Wurth said the unsustainable costs of providing health services to the state's poor is a problem that deserves a thoughtful, multiyear approach, not a crisis approach. And her association is proposing alternatives to steep Medicaid cuts, such as increasing revenues through higher cigarette taxes and taxing junk food and soda.

Quinn, who will deliver his budget address on Wednesday, has said he wants to cut $2 billion from Medicaid -- about 14 percent of total spending on a health care program that covers 2.7 million poor and disabled Illinois residents. In a previous AP interview, Illinois Department of Healthcare and Family Services Director Julie Hamos said lawmakers will have to consider payment cuts to doctors and hospitals, trimming benefits and lowering the number of people eligible.

Wurth drew a line on payment cuts. The hospital association will "vigorously" fight any cuts to Medicaid payments to hospitals, she said. Such payment cuts could result in the closure of struggling hospitals, leaving Illinois with more "health care deserts," such as in East St. Louis, which already lost its only hospital.

"This is not a haircut; $2 billion is a scalp," Wurth said.

Wurth has represented 200 Illinois hospitals as president and CEO of the Illinois Hospital Association since October 2009. Below are edited excerpts of what she told the AP:

Q. What do you think of Gov. Quinn's proposal to cut $2 billion, about 14 percent of total Medicaid spending?

A. Frankly, it is unbelievable that there would be a suggestion to take $2 billion out of a $15 billion Medicaid program. We think, fundamentally, that is the wrong discussion to have. And we hope the governor reconsiders his position on this. ...

This should not be a math exercise. We should not be asking how do we close the budget gap. We need a much more thoughtful dialogue (about) what we aspire to as far as the health of the Illinois population. ... We're asking that we pause and start on some Year One activities and have a dialogue that is purposeful and planned. (We need) a data-driven approach for how we reform the Medicaid system over time.

Q. One of your proposals involves increasing a tax on hospitals. Through this tax, Illinois hospitals already pay $900 million a year. Can you explain how your proposal would work?

A. Hospitals would pay a tax on outpatient gross revenues, which would generate a $240 million federal match per year. That would result in $480 million a year to Medicaid providers, including hospitals, nursing homes and providers of services for people with developmental disabilities.

State general funds now pay for only a third of the total cost of Medicaid payments to hospitals (the rest coming from the federal government and the hospital tax). We do recognize and understand the situation the state is in. ... In essence, we're looking at taxing outpatient services to fund an additional amount of money.

Q. You also propose increasing revenues for Medicaid by raising cigarette taxes from the current 98 cents a pack, adding a tax on junk food and increasing the sales tax on soft drinks. Why is that a good idea?

A. Taxing behaviors that lead to higher health care costs not only raise revenue, but also improve health. It's the right thing to do.

A. We certainly will be opposing them vigorously. This is not a haircut; $2 billion is a scalp.

Most states have some kind of trend factor figured into their reimbursement rates, such as cost-of-living adjustments, recognizing that hospitals' costs are rising. In this state, the rates (for Medicaid payments to hospitals) have been frozen for 17 years. ... By holding it flat, the state has done a very good job of financial management. We rank 44th in the country for Medicaid spending per (eligible person) at $5,773.

Q. You're suggesting that poor decisions on Medicaid could lead to "health care deserts" in rural and urban areas of Illinois. What do you mean by that?

A. We have about a third of our hospitals that have margins in the red right now. ... You can only survive that way for so long. ... If they are put in such a serious financial position, if they are forced to close, we will be left with certain communities that do not have access to care.

There are neighborhoods in the Chicago area I wouldn't call health care deserts yet (but would be at risk). ... Hardin County General Hospital (in southeast Illinois) now serves three counties (Hardin, Pope and Gallatin).

Q. Any closing thoughts on Medicaid?

A. Changes in the Medicaid system do need to occur and we want to be partners with the state to figure this out. ... It can't happen overnight and it can't happen by scalping payment rates to hospitals. That ultimately leads to lost jobs and services, and hurts the accessibility of health care to patients and communities that our residents deserve.

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